Is the Vodafone share price an opportunity at current levels?

Jabran Khan looks at the current Vodafone share price and decides if he would add the shares to his holdings based on recent events.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Like many stocks, Vodafone (LSE:VOD) saw its share price drop in March due to the stock market correction linked to macroeconomic and geopolitical issues. So what’s the current state of play with the Vodafone share price and is there an opportunity to add the shares at a cheaper price to my holdings? Let’s take a closer look.

Vodafone share price fights back after the correction

As a quick reminder, Vodafone is one of the biggest telecommunications businesses in the world. Here in the UK, it is a major mobile network provider and also operates fibre internet and fintech businesses throughout Africa and Europe. It has approximately 180m customers.

When the stock market correction occurred in early March, Vodafone shares hit a low of 116p. As I write, the shares are trading for 130p, which is a 12% increase over a 10-week period. To provide a broader picture, the Vodafone share price is trading very close to levels seen this time last year, when it was trading for 128p.

With the Vodafone share price slowly increasing since the correction, is now a good time to add the shares to my holdings?

For and against buying the shares

FOR: Vodafone’s fundamentals and performance looks good to me currently. I do understand that past performance is not a guarantee of the future, however. Looking back, I can see that revenue has grown in three out of the past four years. The exception was a small dip in 2021 due to the pandemic. Full-year results for 2022 were released last week and made for good reading. Compared to 2021, revenue, operating profit, earnings per share, and cash flow increased.

AGAINST: One of my major concerns with Vodafone shares is its current debt levels. In fact, debt increased based on 2022 results, compared to the same period last year. With rising interest rates, this debt could be harder to service and pay down. This could affect returns and the Vodafone share price.

FOR: One of Vodafone’s biggest attractions is its dividend yield. Dividends can boost my passive income stream. The current yield stands at close to 6%. This is higher than the FTSE 100 average which is 3%-4%. It is worth remembering that dividends can be cancelled at any time, of course.

AGAINST: Despite the attractive dividend yield, Vodafone’s current strategy does baffle me a little bit. It continues to shoulder rising debt levels, which are becoming more precarious in the face of current worldwide macroeconomic headwinds, but continues to pay a decent dividend and engage in share buyback programmes. Is this a sustainable position? I’m not so sure.

Here’s what I’d do now

There is a lot for me to consider when deciding whether to add Vodafone to my holdings. Another factor that came into play this month was when UAE-based, state-backed e& (previously known as Etisalat) purchased a £3.3bn stake in the company. This investment caused the Vodafone share price to spike. Could this investment bring with it a renewed focus on strategy with a view to reducing debt and growing performance? Time will only tell but I am buoyed by it as it could provide access to another territory too.

I decided to add Vodafone shares to my holdings. They aren’t the cheapest but the dividend yield, market position, and profile of the business, coupled with this fresh investment, could see the Vodafone share price continue to rise. I also expect to see consistent returns as well.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jabran Khan owns shares in Vodafone. The Motley Fool UK has recommended Vodafone. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Two business people sitting at cafe working on new project using laptop. Young businesswoman taking notes and businessman working on laptop computer.
Investing For Beginners

Up 10% in a day, this FTSE 250 stock still looks undervalued to me

Jon Smith explains why a FTSE 250 finance stock has soared higher and flags up reasons why this might not…

Read more »

Rolls-Royce's Pearl 10X engine series
Investing Articles

Rolls-Royce shares are close to reaching £10. Is it too late to buy?

Rolls-Royce shares have come a long way. With the price within spitting distance of £10, our writer considers whether he…

Read more »

Close up of manual worker's equipment at construction site without people.
Investing Articles

With H1 profits back on track, is this FTSE 250 housebuilder ready to bounce back?

Operating profits are down 22% at Vistry. But as cost issues give way to government support, could the FTSE 250…

Read more »

Investing Articles

2 fantastic UK growth stocks to consider for a Stocks and Shares ISA

Looking for opportunities for a Stocks and Shares ISA portfolio? Our writer shares two ideas from the London Stock Exchange.

Read more »

DIVIDEND YIELD text written on a notebook with chart
Investing Articles

Investors could target £8,840 of annual dividend income from 5,851 shares in this FTSE 250 high-yield star!

Shares in this FTSE 250 stock generate a much higher dividend yield than the index average and can produce potentially…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

HSBC’s share price has dipped 5% to just over £9, so should I buy more right now?

HSBC’s share price has dipped in recently, but this could signal a bargain to be had. I ran the key…

Read more »

many happy international football fans watching tv
Investing Articles

Is this FTSE 250 stock gearing up to more than double its market cap by October?

Our writer considers the implications of a recent stock market announcement for the share price of this FTSE 250 retailer.…

Read more »

Inflation in newspapers
Investing Articles

3 overlooked UK shares growing dividends faster than inflation

Mark Hartley highlights three lesser-known UK shares offering inflation-beating dividends, while noting key risks investors should watch.

Read more »